By CLAUDIA H. DEUTSCH

Published: January 26, 1992

Correction Appended

FILA SPORTS, the high-priced Italian sports clothes company, just opened its first New York boutique, at 831 Madison Avenue near 69th Street, in the heart of designer row.

"We've always wanted to be associated with the likes of Ralph Lauren and Armani, but it took until now to find exactly the space we want," said Christine A. Massetani, advertising and promotions director at the company's American headquarters in Brisbane, Calif.

Morse Shoe, the Canton, Mass., company that owns Fayva shoe stores, just emerged from bankruptcy in December and already is looking to open some 25 stores in New York this year. "I'm mounting a full-court press to open new stores while landlords are still realistic about rents and terms," said Vincent Brown, Fayva's vice president of real estate.

For retailers, New York has become the ultimate space buyers' market. Rents are falling on every shopping thoroughfare. Landlords are wooing desirable tenants with longer rent-free periods in which to tailor the space to their needs before opening their doors. They are making available huge blocks of prime space, often vacated by banks, that make chains like the Gap or The Limited salivate. They are welcoming restaurants, cheese stores, discount houses -- all sorts of tenants that, in palmier days, were unwelcome for either hygienic or image reasons.

"There's no question landlords are taking tenants they wouldn't take before," said Ralph Friedman, vice president of Dakota Realty, a Manhattan brokerage.

One example is Cosmetics Plus, a discount cosmetics shop with a well-earned reputation for bargaining rents down. It recently moved into the prime space at 57th Street and Seventh Avenue opposite Carnegie Hall that formerly was occupied by a Barnes & Noble bookstore. Barnes & Noble also is a discounter but in the world of retail leasing, it ranks higher in prestige because it sells culture rather than lip gloss.

Eddie Bauer, known mainly as a mail-order clothing and sporting goods company, has opened stores on 58th Street and Madison Avenue and 45th Street and Third Avenue. Innovation Luggage is at 43d Street and Fifth Avenue, in space where Nynex once sold computers. The Gap, which declined to discuss its expansion strategies, is "bidding on every location around," said one broker.

All told, the commercial real estate depression has turned into the one bright spot in the glum retailing landscape. Solvent companies are getting into locations they could only dream about two or three years ago.

SHAKY retailers are scrounging for extra cash to take advantage of some of the best store availabilities and rent bargains in two decades. And money-losing retailers are playing out the corporate version of the beleaguered executive who comes home and kicks the dog: After mollifying their own bankers and shuddering at their anemic receipts, they are wringing concessions from their landlords.

According to Garrick-Aug Associates, the country's largest retail real estate broker, the retail vacancy rate in Manhattan is now about 10 percent. This means nearly 7 million square feet of space is available -- up 75 percent from the 4 million vacant square feet of just three years ago.

Not surprisingly, landlords, many of whom are deeply in debt, are growing increasingly desperate to keep old tenants and get new ones. Garrick-Aug says that by the middle of last year the gap between the average asking price for a square foot of retail space ($61) and actual rents ($41) -- the so-called negotiability factor -- had hit 32.7 percent. Even though those numbers include the lowest-rent side streets and East Village avenues, they indicate a pretty hefty dose of realistic pessimism in prime space, too.

"This is the best retail real estate market tenants have faced in 25 years," said Charles Aug, the firm's president. He should know: He just gave the 14+ Store in Union, N.J., which occupies space his firm owns, an 8 percent rent concession for the remaining two years of its lease. "They were a good tenant," he said. "I didn't want to lose them."

Industry insiders say such examples abound. The co-op at 25 West 13th Street owns two 5,000-square-foot stores fronting on 14th Street -- prime shopping territory for the two low-priced variety stores in occupancy. Three years ago the co-op planned to raise rents on the stores when their leases came due in September 1991. The stores were paying $18 a square foot and the co-op planned to raise this to more than $100. It settled for $50 -- and felt lucky at that.

"The days when a co-op could assume that retail rents will carry the entire operating cost of the building above are long gone," said James G. Samson, a partner in the Manhattan law firm Haas, Greenstein, Samson, Cohen & Gerstein and the co-op board's lawyer.

Like office buildings, residential co-ops and condominiums, once among the pickiest of landlords, are welcoming tenants that were once anathema. "Co-ops used to want stores that would attract buyers of apartments," said Neil Kreisel, president of the Kreisel Company, which manages co-ops and condominiums. "Now they want stores that generate revenues."

Correction: February 2, 1992, Sunday An article last Sunday about retail vacancies in Manhattan misstated the terms of Fila's lease for its new Madison Avenue store and misidentified the negotiating broker. The lease is for $3 million over 10 years. The brokers were Stuart S. Ellman and Helene Wall of Judson Realty.